EXHIBIT 1
ASSET
PURCHASE
TRANSACTION
BETWEEN
NETWORK LONG DISTANCE, INC.
AND
VALUE TEL, INC.
DATED
OCTOBER 31, 1995
TABLE OF CONTENTS
1. Asset Purchase Agreement
2. Schedule 1.1: "The Assets"
3. Schedule 2.3(b)(i): "Qualified Customer Accounts"
4. Schedule 2.3(b)(viii): "Accounts Receivable"
5. Schedule 2.4: Allocation of Purchase Price
6. Schedule 2.5: Liabilities and Obligations Assumed by Purchaser
7. Schedule 3.5: Liens and Encumbrances
8. Schedule 3.6: Material Contracts
9. Schedule 3.8(a): Actions, Suits, Proceedings, etc.
10. Schedule 3.8(c): Licenses, Permits, etc.
11. Exhibit 6.1 Service Agreement
12. Exhibit 11.12(b): Lock-Up Agreement
13. Xxxx of Sale
14. Master Letter of Agency
15. Xxxxxx Noncompete
16. Waterloo Noncompete
17. X. Xxxxx Noncompete
18. X. Xxxxx Noncompete
20. Wiltel - Network - Value Tel Tri-Party Agreement
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (the "Agreement") is made and entered into
as of the 31st day of October, 1995 between Network Long Distance, Inc., a
Delaware corporation ("PURCHASER"), and Value Tel, Inc., a Delaware
corporation ("SELLER").
WHEREAS, Seller conducts business as a reseller of long distance
telecommunications services and has established retail end user customer
bases in various states in the United States; and
WHEREAS, Purchaser desires to purchase selected assets of Seller on the
terms and subject to the conditions of this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual
promises, covenants, representations and warranties herein contained, it is
hereby agreed as follows:
1. SALE AND TRANSFER OF ASSETS
1.1 ASSETS TO BE SOLD
Subject to the terms and conditions set forth in this Agreement,
Seller agrees to sell, convey, transfer, assign and deliver to Purchaser, and
Purchaser agrees to purchase from Seller, all or substantially all of
Seller's assets (ALL OF WHICH ARE SOMETIMES COLLECTIVELY REFERRED TO AS THE
"ASSETS" AND ALL OF WHICH ARE LISTED, BY TYPE OF ASSET, IN SCHEDULE 1.1
HERETO), as follows:
(a) All Qualified Customer Accounts (as such term is defined
below), including all customer lists, mailing lists, books, records, files,
data, letters of agency and similar items related to the Qualified Customer
Accounts;
(b) All accounts receivable associated with and derived from the
Qualified Customer Accounts and other mutually agreed to accounts receivable;
(c) All of Seller's rights under any agreements, application
forms, term contracts, letters of agency and all other contractual
instruments related to the Qualified Customer Accounts (COLLECTIVELY, THE
"CUSTOMER CONTRACTS"), including but not limited to Seller's right to assert
claims and take other rightful actions in respect of breaches, defaults and
other violations of such Customer Contracts;
(d) All customer and other deposits held or made by Seller related
to the Qualified Customer Accounts; and
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(e) All dialers, T-1's and other equipment currently used by or
for the customers relative to the Qualified Customer Accounts.
1.2 ASSETS RETAINED BY SELLER
All assets of Seller not listed in Schedule 1.1 are being retained
by Seller (and are hereby excluded from the Assets described in Section 1.1).
2. THE CLOSING
2.1 PLACE AND DATE
The closing of the purchase and sale of the Assets (the "Closing")
shall take place at the offices of Purchaser, 000 Xxxxxxx Xxxxxx, Xxxxx
Xxxxx, Xxxxxxxxx, 00000, at or before 10:00 a.m., local time, on or before
November 1, 1995, provided that the conditions set forth in Section 7 hereof
have been satisfied. The date of the Closing is herein referred to as the
"CLOSING DATE."
2.2 TRANSFER OF ASSETS
(a) At the Closing and subject to the terms and conditions of this
Agreement, Seller shall deliver to Purchaser the following, and
simultaneously with such delivery, Seller shall take such action as may be
necessary or reasonably requested by Purchaser to place Purchaser in
possession and control of the Assets:
(i) Such bills of sale, assignments, novation agreements,
master letters of agency or other instruments of transfer and assignment as
shall be necessary to vest in Purchaser title to the Assets sold and assigned
under this Agreement, free and clear of all liens, claims and encumbrances;
(ii) Copies of resolutions of the Board of Directors of Seller
authorizing the execution, delivery and performance of this Agreement by
Seller and a certificate of Seller's secretary, dated the Closing Date, that
such resolutions were duly adopted and are in full force and effect;
(iii) A current list of the Qualified Customer Accounts to
be transferred with an accounts receivable aging report for such Qualified
Customer Accounts;
(iv) Such other certificates or other documents or instruments
as the Purchaser or Purchaser's counsel may reasonably request.
(b) At the Closing, as a condition to Seller's obligations under
this Agreement, Purchaser shall deliver to Seller the following:
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(i) All instruments as may be reasonably necessary by which
Purchaser assumes the obligations and liabilities to be assumed by it
hereunder;
(ii) Copies of resolutions of the Board of Directors of
Purchaser authorizing the execution, delivery and performance of this
Agreement by Purchaser and a certificate of Purchaser's secretary, dated the
Closing Date, that such resolutions were duly adopted and are in full force
and effect; and
(iii) Such other certificates or other documents or
instruments as Seller or Seller's counsel may reasonably request.
2.3 PURCHASE PRICE; ADJUSTMENTS; PAYMENT OF THE PURCHASE PRICE
(a) In full consideration for the Assets to be transferred to
Purchaser, Purchaser shall pay to Seller a combination of consideration (THE
"PURCHASE PRICE") equal to the total of the Customer Base Purchase Price plus
the Accounts Receivable Purchase Price (as such terms are defined below).
(B) DEFINITIONS:
(i) "QUALIFIED CUSTOMER ACCOUNT" shall mean any end user long
distance telecommunications customer account of Seller which: (1) is not
affiliated with Seller in any way; (2) is not comprised, in whole or in part,
of any outstanding balance(s) which is/are more than sixty (60) days past due
as of the Closing Date (unless mutually agreed to by the parties); and (3) is
listed in SCHEDULE 2.3(b)(i) hereto (which schedule shall be updated as of
the Closing Date).
(ii) "MEASUREMENT PERIOD" shall mean the period commencing
September 1, 1995 and ending October 15, 1995 (THE "MEASUREMENT PERIOD").
(iii) "AVERAGE WEEKDAY NET REVENUE" shall mean the average
daily gross toll usage and pro rata monthly fees for each Qualified Customer
Account for all weekdays (except holidays) during the Measurement Period, net
of any discounts and minus one-time only charges, late fees, finance charges,
pass-through charges, credits, chargebacks, interest, charges stemming from
abuse calls, charges stemming from intra-company or related party calls of
Seller and all taxes.
(iv) "AVERAGE WEEKEND DAY NET REVENUE" shall mean the average
daily gross toll usage and pro rata monthly fees for each Qualified Customer
Account for all weekend days (except holidays) during the Measurement Period,
net of any discounts and minus one-time only charges, late fees, finance
charges, pass-through charges, credits, chargebacks, interest, charges
stemming from abuse calls, charges stemming from intra-company or related
party calls of Seller and all taxes.
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(v) "TOTAL NET REVENUE" shall mean Average Weekday Net
Revenue multiplied by twenty-one (21) plus Average Weekend Day Net Revenue
multiplied by nine (9).
(vi) "BAD DEBT FACTOR" shall mean three percent (3%)
multiplied by Total Net Revenue.
(vii) "CUSTOMER BASE PURCHASE PRICE" shall mean Total Net
Revenue less the Bad Debt Factor multiplied by ten and one-half (10.5).
(EXAMPLE: If Total Net Revenue equals $900,000 and the Bad Debt Factor equals
$27,000, then the Customer Base Purchase Price shall equal $9,166,500).
(viii)"ACCOUNTS RECEIVABLE" shall mean the accounts
receivable, as of midnight on October 31, 1995, which are associated with and
derived from the Qualified Customer Accounts or which are mutually agreed to
by the parties. Accounts Receivable shall be listed, in gross numerical
dollar amounts, in SCHEDULE 2.3(b)(viii) hereto (which schedule shall be
updated as of the Closing Date).
(ix) "ACCOUNTS RECEIVABLE PURCHASE PRICE" shall mean the
total of Seller's gross Accounts Receivable relative to each Qualified
Customer Account as of October 31, 1995 multiplied by a factor of one hundred
percent (100%).
(c) MANNER AND FORM OF PAYMENT: The Purchase Price shall consist
of restricted shares of Purchaser's voting common stock and the assumption of
liabilities in accordance with Section 2.5 below.
(i) The total of all liabilities to be assumed by Purchaser
pursuant to Section 2.5 below shall be deducted from the Purchase Price and
the difference shall be known as the "STOCK PORTION".
(ii) The Stock Portion shall be paid in shares of Purchaser's
voting common stock which are restricted from transfer under SEC Rule 144
(THE "RESTRICTED STOCK").
(iii) The number of shares of Restricted Stock to be paid
shall be computed by dividing the Stock Portion by the "Denominator" (as such
term is defined below).
(1) If the average of the prevailing "bid" and "asked"
price per share as of the close of the stock market on the day before the
Closing is $10, the "DENOMINATOR" shall be equal to $10.
(2) If the average of the prevailing "bid" and "asked"
price per share as of the close of the stock market on the day before the
Closing is not exactly
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$10 but between $8.50 and $11.50, the Denominator shall be equal to one-half
(1/2) of the sum of said average plus $10.
(3) If the average of the prevailing "bid" and "asked"
price per share as of the close of the stock market on the day before the
Closing is less than $8.50, the Denominator shall be equal to $9.25.
(4) If the average of the prevailing "bid" and "asked"
price per share as of the close of the stock market on the day before the
Closing is greater than $11.50, the Denominator shall be equal to $10.75.
(d) ESCROWED SHARES.
(i) At the Closing, ten thousand (10,000) shares of
Restricted Stock shall be placed in an escrow account ("ESCROWED SHARES") as
security for Seller's payment of any reimbursement(s) necessitated by the
Customer Evaluation (as such term is defined below). Any Escrowed Shares
relating to this paragraph which remain in escrow after the Customer
Evaluation shall be released by the escrow agent and delivered to Seller.
(ii) An additional six thousand five hundred (6500) shares
of Restricted Stock shall also be placed in an escrow account at the Closing
as security for Seller's payment of any sums it must indemnify Purchaser for
under the terms of Section 2.6 below. Any Escrowed Shares relating to this
paragraph which remain in escrow after six (6) months from the Closing shall
be released by the escrow agent and delivered to Seller.
(e) CUSTOMER EVALUATION. Upon the expiration or termination of
the Service Agreement, but in no event later than nine (9) months after the
Closing (THE "EVALUATION PERIOD"), the parties shall mutually evaluate
whether there has been an increase or decrease in the Total Net Revenue.
Such evaluation shall be known as the "CUSTOMER EVALUATION".
(i) If the Customer Evaluation reveals an increase in Total
Net Revenue, as measured by comparing the Total Net Revenue of the Qualified
Customer Accounts for the Measurement Period to the Total Net Revenue of
Qualified Customer Accounts assuming, for purposes of this paragraph, that
the Measurement Period equals the six (6) week period ending on the date of
expiration of the Initial Term of the Service Agreement (or termination of
the Service Agreement, whichever occurs earlier), Purchaser shall pay Seller
the amount of the increase multiplied by ten and one-half (10.5). Any
payment resulting from such increase shall be in the form of voting shares of
Purchaser's common stock which are restricted under SEC Rule 144. The number
of shares to be paid shall be calculated using the average of the prevailing
"bid" and "asked" price per share as of the close of the stock market on the
day before the date of the Customer Evaluation.
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(ii) If the Customer Evaluation indicates a decrease in Total
Net Revenue greater than one and one-half percent (1.5%) per month (THE
"ALLOWABLE ATTRITION"), as measured by comparing the Total Net Revenue of the
Qualified Customer Accounts for the Measurement Period to the Total Net
Revenue of Qualified Customer Accounts assuming, for purposes of this
paragraph, that the Measurement Period equals the six (6) week period ending
on the date of expiration of the Initial Term of the Service Agreement (or
termination of the Service Agreement, whichever occurs earlier), the Purchase
Price shall be reduced by an amount equal to ten and one-half (10.5) times
the excess of the decrease over the Allowable Attrition. Any reimbursement
due as a result of such reduction shall be paid from the Escrowed Shares.
The number of Escrowed Shares to be reimbursed shall be calculated using the
average of the prevailing "bid" and "asked" price per share as of the close
of the stock market on the day before the date of the Customer Evaluation.
If the Escrowed Shares are insufficient to fully reimburse Purchaser pursuant
to this paragraph, Seller shall pay Purchaser a sufficient number of shares
out of the Restricted Stock it receives at the Closing in order to complete
the reimbursement.
2.4 ALLOCATION OF PAYMENT OF PURCHASE PRICE
The purchase price shall be allocated in accordance with SCHEDULE
2.4 hereto which shall be submitted by Purchaser at the Closing, and all tax
returns filed by the parties shall be consistent with such Schedule. Seller
and Purchaser shall each file all applicable IRS Forms, including but not
limited to Form 8594, in a consistent manner and in accordance with such
allocation and applicable law and regulations.
2.5 ASSUMPTION OF SPECIFIC LIABILITIES
At the Closing, the Purchaser shall assume and shall subsequently
honor and discharge, in accordance with the relevant governing agreements,
only the obligations of Seller as, and only to the extent, listed on SCHEDULE
2.5 hereto. Purchaser shall further assume and shall subsequently honor and
discharge those obligations or liabilities which arise out of the ownership,
use or operation of the Assets, the factual and causative basis of which said
obligations or liabilities occur after the Closing Date, including but not
limited to any and all applicable sales agent commissions (the "AGENT
COMMISSIONS"), not to exceed seven percent (7%) of Net Total Revenue, for as
long as said Agent Commissions are due and payable under the terms of the
relevant governing agreements between Seller and its various sales agents
(the "AGENT CONTRACTS"). Seller hereby assigns, and Purchaser agrees to
partially assume, the Agent Contracts only as they pertain to the Qualified
Customer Accounts and the obligation to pay Agent Commissions thereon (only
as said Agent Commissions relate to the Qualified Customer Accounts purchased
by Purchaser at the Closing).
2.6 LIMITATION ON ASSUMPTION OF LIABILITIES
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Purchaser shall not be liable for any of the obligations or
liabilities of Seller, of any kind or nature, other than those specifically
assumed by Purchaser hereunder. Seller shall pay, perform and discharge all
of its valid liabilities and obligations which are not so assumed by
Purchaser and shall specifically indemnify and hold harmless Purchaser from
and against same. Such indemnification (THE "INDEMNIFICATION PAYMENT") shall
be due within ten (10) days of Seller's receipt of written notice from
Purchaser. The Indemnifcation Payment shall be paid first in the form of the
Escrowed Shares pursuant to paragraph 2.3(d)(ii). The number of Escrowed
Shares to be reimbursed shall be calculated using the average of the
prevailing "bid" and "asked" price per share as of the close of the stock
market on the day before the date of the Indemnification Payment. If the
Escrowed Shares are insufficient to fully pay the Indemnification Payment,
Seller shall pay Purchaser a sufficient number of shares out of the
Restricted Stock it receives at the Closing in order to complete the
Indemnification Payment.
3. REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Purchaser as follows:
3.1 ORGANIZATION AND AUTHORITY
Seller is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware and has all requisite
power and authority to own, operate and lease its properties and to carry on
its business as now being conducted.
3.2 AUTHORIZATION OF AGREEMENT
The Board of Directors of Seller, pursuant to the power and
authority legally vested in it, has duly authorized the execution, sealing
and delivery of this Agreement by Seller and the transactions hereby
contemplated, and no action, confirmation or ratification by the stockholders
of Seller or by any other person, entity or governmental authority is
required in connection therewith. Seller has the power and authority to
execute, seal and deliver this Agreement, to consummate the transactions
hereby contemplated and to take all other actions required to be taken by it
pursuant to the provisions hereof. Seller has taken all actions required by
law, its Certificate of Incorporation, its Bylaws or otherwise to authorize
the execution, sealing and delivery of this Agreement. This Agreement is
valid and binding upon Seller in accordance with its terms. Neither the
execution, sealing and delivery of this Agreement nor the consummation of
said transactions will constitute any violation or breach of the Certificate
of Incorporation or the Bylaws of Seller, or any order, writ, injunction,
decree, law, rule or regulation applicable to Seller.
3.3 NO CONFLICTS
To the best of Seller's knowledge, the execution, delivery and
performance of this Agreement and the consummation of all of the transactions
contemplated hereby:
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(i) do not and will not with or without the giving of notice or passage of
time or both, violate, conflict with or result in a breach or termination of
any provision of, or constitute a default under, or accelerate or permit the
acceleration of the performance required by the terms of, or result in a
creation of any mortgage, security interest, claim, lien, charge or other
encumbrance upon any of the Assets pursuant to, or otherwise give rise to any
liability or obligation under any agreement, mortgage, deed of trust,
license, permit or other agreement or instrument, or any order, judgment,
decree, statute, regulation or any other restriction of any kind or
description to which Seller is a party or by which Seller or the Assets may
be bound; and (ii) will not terminate or result in the termination of any
such agreement or instrument, or in any way affect or violate the terms and
conditions of, or result in the cancellation, modification, revocation or
suspension of, any rights in or to the Assets.
3.4 ACCOUNTS RECEIVABLE
All Accounts Receivable for the Qualified Customer Accounts are
listed (with agings) in SCHEDULE 2.3(b)(viii).
3.5 TITLE TO PURCHASED ASSETS
Seller has, and on the Closing Date will have, good and marketable
title to all of the Assets free and clear of all claims and encumbrances,
except claims and encumbrances listed on SCHEDULE 3.5.
3.6 MATERIAL CONTRACTS
Except as disclosed in SCHEDULE 3.6 hereto, Seller is not a party
to or bound by any material written or oral contracts, obligations or
commitments related to the Qualified Customer Accounts, including any written
or oral commitments to pay commissions or other compensation relative to the
Qualified Customer Accounts. Seller has delivered or made available to
Purchaser correct and complete copies of all of the contracts, agreements and
other documents listed in Schedule 3.6 hereto and all amendments thereto and
waivers granted thereunder. The rights and interest of Seller in all such
contracts and agreements under the heading "Agreements Assumed" may be
assigned to Purchaser without the consent of any other person, except as
otherwise disclosed on Schedule 3.6, and at the Closing, Purchaser will
acquire all such rights and interest. There are no unresolved disputes
pending or, to the best knowledge of Seller, threatened under or in respect
of any such contracts or agreements. All such contracts and agreements are
valid and effective in accordance with their respective terms. It is further
specifically agreed by the parties that, with respect to the Agent Contracts,
Purchaser is only assuming herein the obligation to pay Agent Commissions
with respect to the Qualified Customer Accounts which are being purchased by
Purchaser at the Closing; Purchaser is not assuming the Agent Contracts
themselves.
3.7 CUSTOMER RELATIONSHIPS
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Seller has no knowledge that any Qualified Customer Account has
been terminated or is expected to be terminated, in whole or in part;
provided, however, that this subsection shall not be construed as a
representation, warranty, or guarantee that any such customer will, after the
Closing, maintain its present business relationships with Purchaser. To the
best of Seller's knowledge, no director or officer of Seller has any direct
or indirect interest in any such Qualified Customer Accounts.
3.8 LITIGATION; COMPLIANCE
(a) To the best of Seller's knowledge, except as disclosed in
SCHEDULE 3.8(a) hereto, there are no actions, suits, proceedings or
arbitrations or governmental investigations pending or threatened against, by
or affecting Seller (or to the best of the knowledge of Seller, any basis
therefor) in which, individually or in the aggregate, an unfavorable
determination could materially and adversely affect any of the Assets or
impede execution of the performance of this Agreement. Seller has not
received any notice of any violation of any applicable Federal, State, local
or foreign law, rule, regulation, ordinance, order or decree relating to the
Assets, and Seller is not aware of any threatened claim of such violation or
any basis therefor.
(b) To the best of Seller's knowledge, Seller has complied and is
in compliance in all material respects with all laws, rules, regulations,
ordinances, orders, decrees, writs, injunctions, building codes, safety, fire
and health codes, or other governmental restrictions applicable to Seller, or
the Assets.
(c) To the best of Seller's knowledge, Seller has all governmental
licenses, permits, approvals or other authorizations presently required to
service the Qualified Customer Accounts, all of which are in full force and
effect and all of which are listed on SCHEDULE 3.8(c) hereto.
3.9 BROKERS, FINDERS, ETC.
Seller has employed no finder, broker, agent or other intermediary
in connection with the negotiation or consummation of this Agreement or any
of the transactions contemplated hereby.
3.10 DISCLOSURE
To the best of Seller's knowledge, no representation or warranty by
Seller and no statement or certificate furnished or to be furnished by or on
behalf of Seller to Purchaser pursuant to this Agreement or in connection
with the transactions contemplated hereby contains any untrue statement of a
material fact or omits to state a material fact necessary in order to make
the statements contained herein or therein not misleading.
3.11 ACQUISITION OF SHARES
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Seller represents and warrants to Purchaser that the shares of
Restricted Stock being acquired by Seller pursuant to this Agreement are
being acquired by Seller for investment for its own account and not with a
view to, or for the offer for sale or for the sale in connection with, any
distribution thereof. Seller covenants and agrees that Seller shall not
sell, assign or otherwise transfer the Shares other than in transactions
which are not in violation of the Securities Act of 1933 and applicable state
securities laws. Each stock certificate of Purchaser representing the
Restricted Stock shall bear the following legend, unless such legend may be
removed in accordance with its terms:
"The securities represented by this stock
certificate have not been registered under the
Securities Act of 1933 (the "Act") or applicable
state securities laws (the "State Acts"), and shall
not be sold, pledged, hypothecated, donated, or
otherwise transferred (whether or not for
consideration) by the holder except upon the
issuance to Purchaser of a favorable opinion of
its counsel or submission to the Corporation of
such other evidence as may be satisfactory to
counsel for Purchaser to the effect that any such
transfer shall ot be in violation of the Act and the
State Acts."
3.12 DISCLAIMER OF FRAUDULENT INTENT.
Seller represents and warrants that the transactions described in this
Agreement have been undertaken in good faith, considering its obligations to
any person or entity to whom Seller owes a right to payment, whether or not
the right is reduced to judgment, liquidated, unliquidated, fixed,
contingent, matured, unmatured, disputed, undisputed, legal, equitable,
secured or unsecured (collectively such persons with such claims are called
"CREDITORS" under this paragraph), and has undertaken these transactions
without any intent to hinder, delay or defraud any such Creditors, and either
has disclosed in the ordinary course of business or will undertake to
disclose to all such Creditors the existence of this transaction, and has not
and will not conceal this transaction or the proceeds ot this transaction
from any such Creditors. Seller further represents and warrants that: (1) it
will not retain possession or control of any of the property transferred
under this Agreement following the Closing, except as expressly provided in
this Agreement and then only for and on behalf of the account of the
Purchaser; (2) the Seller has not been sued or threatened with suit by any
Creditor prior to the execution of this Agreement; (3) the Seller has not
removed or concealed any assets from any Creditors; (4) the Seller has not
incurred any substantial debt that is significantly greater than the normal
and customary debts of the Seller in the ordinary course of business; (5) the
Seller at Closing believes in good faith that Seller will receive
consideration reasonably equivalent to the value of the Assets transferred
under this Agreement.
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4. REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to Seller as follows:
4.1 CORPORATE STATUS
Purchaser is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware with full corporate
power and authority to carry on its business as now conducted.
4.2 AUTHORITY FOR AGREEMENT
Purchaser has the power and authority to execute and deliver this
agreement and to carry out its obligations hereunder. The execution,
delivery and performance by the Purchaser of this Agreement and the
consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of Purchaser. This
Agreement has been duly executed by Purchaser and the transactions
contemplated by it constitute the legal, valid and binding obligation of
Purchaser enforceable against Purchaser in accordance with its terms. No
consent, approval, or authorization of, or declaration, filing, or
registration with, any federal or state governmental or regulatory authority
is required to be made or obtained by Purchaser in connection with the
execution, delivery, and performance of this Agreement and the consummation
of the transactions contemplated by this Agreement, except approval of
applicable public service commissions.
4.3 NO CONFLICTS
To the best of Purchaser's knowledge, the execution, delivery and
performance of this Agreement and the consummation of all of the transactions
contemplated hereby: (i) do not and will not with or without the giving of
notice or passage of time or both, violate, conflict with or result in a
breach or termination of any provision of, or constitute a default under, or
accelerate or permit the acceleration of the performance required by the
terms of, or result in a creation of any mortgage, security interest, claim,
lien, charge or other encumbrance upon any of the Assets pursuant to, or
otherwise give rise to any liability or obligation under any agreement,
mortgage, deed of trust, license, permit or other agreement or instrument, or
any order, judgment, decree, statute, regulation or any other restriction of
any kind or description to which Purchaser is a party or by which Purchaser
or the Assets may be bound; and (ii) will not terminate or result in the
termination of any such agreement or instrument, or in any way affect or
violate the terms and conditions of, or result in the cancellation,
modification, revocation or suspension of, any rights in or to the Assets.
4.4 CONTINUED COMPETITION
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Purchaser hereby acknowledges that Seller is a competitor of
Purchaser in the long distance telecommunications industry. Subject to any
and all applicable noncompetition covenants, Purchaser hereby consents to the
continued competition by Seller and Seller's individual shareholders in the
long distance telecommunications industry.
5. SELLER'S OBLIGATIONS BEFORE CLOSING
Seller covenants that from the date of this Agreement and until the
Closing Date:
(a) Purchaser and its counsel, accountants and other
representatives shall have full access to all properties, books, accounts,
records, contracts and documents of or relating to the Assets, but Purchaser
shall not have access to any information not related to the Assets. Seller
shall furnish or cause to be furnished to Purchaser and its representatives
all data and information concerning the Assets that may be reasonably
requested. Seller agrees that, unless and until the Closing has been
consummated, Seller and its officers, directors and other representatives
will hold in strict confidence, and will not use to the detriment of
Purchaser, all data and information with respect to Purchaser and Purchaser's
business and operations obtained in connection with this transaction or
Agreement. If the transaction contemplated by this Agreement are not
consummated, Purchaser will return to Seller all data and information that
Seller may reasonably request including all documents prepared or made
available to Purchaser by Seller in connection with this Agreement.
(b) Seller will, with respect to the Qualified Customer Accounts,
carry on its business and activities diligently and in substantially the same
manner as they previously have been carried out and shall not make or
institute any unusual or novel methods of management or operations to the
detriment of Purchaser that vary materially from those methods used by Seller
as of the date of this Agreement relating to the Qualified Customer Accounts,
without the prior written consent of Purchaser.
6. COVENANTS
6.1 TRANSITION SERVICES
Seller shall provide billing and customer base transition services
for the transferred customers at Purchaser's expense and in accordance with
the terms of a service agreement between the parties to be executed at the
Closing (THE "SERVICE AGREEMENT"). The Service Agreement shall provide,
among other things, that the fees and charges to be paid to Seller by
Purchaser shall be equal to Seller's actual cost of providing the specified
transition services but in no event shall said fees and charges exceed three
percent (3%) of the Total Net Revenue. The Service Agreement shall further
provide that Purchaser shall pay all applicable sales agent commissions
relative to the Qualified Customer Accounts but in no event shall said sales
agent commissions exceed seven percent (7%) of Total Net Revenue. The
Service Agreement shall be for a period
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of six (6) months. A copy of the Service Agreement is attached hereto and
made a part hereof as Exhibit 6.1.
6.2 FURTHER ASSURANCES
At any time and from time to time after the Closing Date, each
party shall, without further consideration, execute and deliver to the other
such other instruments of transfer and assumption and shall take such other
action as the other may reasonably request to carry out the transfer of the
Assets and the assumption of the specific liabilities contemplated by this
Agreement.
6.3 STANDSTILL; PUBLIC ANNOUNCEMENT
Prior to the Closing or termination of this Agreement, Seller
agrees not to directly or indirectly solicit, entertain or encourage offers
or negotiate with any other person or entity regarding the purchase or sale
of the Assets except with respect to Wiltel's first lien and priority on the
Assets. Seller shall not make any public announcement with respect to the
subject matter of this Agreement without the prior written consent of
Purchaser. Purchaser intends to make an announcement consistent with its
public disclosure obligations.
7. CONDITIONS PRECEDENT
7.1 CONDITIONS TO OBLIGATIONS OF PURCHASER
The obligation of Purchaser to pay the Purchase Price to Seller and
to satisfy its other obligations hereunder shall be subject to fulfillment
(or waiver by Purchaser) at or prior to the Closing, of the following
additional conditions, which Seller agrees to use its best efforts to cause
to be fulfilled:
(a) REPRESENTATIONS, PERFORMANCE
The representations and warranties of Seller contained in
Section 3 hereof shall be true in all material respects at and as of the
Closing Date, except as affected by the transactions contemplated hereby.
Seller shall have duly performed and complied with all agreements and
conditions required by this Agreement to be performed, or complied with, by
it prior to or on the Closing Date. There shall have been no material
adverse change in the Qualified Customer Accounts.
(b) CONSENTS
Any required material approvals, acceptances, and consents of
or to the transactions contemplated hereby, shall have been applied for,
including notice to applicable public service commission.
13
(c) CORPORATE PROCEEDINGS
All corporate and other proceedings of Seller in connection
with the transactions contemplated by this Agreement and all documents and
instruments incident to such corporate proceedings, shall be reasonably
satisfactory in substance and form to Purchaser, and Purchaser shall have
received all such documents and instruments, or copies thereof.
(d) MINIMUM XXXXXXXX
That the Total Net Revenue with respect to the Qualified
Customer Accounts for the Measurement Period is, or shall be, not less than
$850,000.
7.2 CONDITIONS TO OBLIGATIONS OF SELLER
The obligations of Seller to deliver the xxxx of sale, assignments,
endorsements and other instruments of transfer relating to the Assets and to
satisfy Seller's other obligations hereunder shall be subject to the
fulfillment, on or prior to the Closing Date (or waiver by Seller), of the
following conditions, which Purchaser agrees to use its best efforts to cause
to be fulfilled:
(a) REPRESENTATIONS, PERFORMANCE
The representations and warranties of Purchaser contained in
Section 4 hereof shall be true at and as of the Closing Date. Purchaser
shall have duly performed and complied in all material respects with all
agreements and conditions required by this Agreement to be performed, or
complied with, by it prior to or on the Closing Date.
(b) CORPORATE PROCEEDINGS
All corporate and other proceedings in connection with the
transactions contemplated by this Agreement, and all documents and
instruments incident thereto, shall be satisfactory to Seller and Seller
shall have received all such documents and instruments, or copies thereof.
(c) NO MATERIAL CHANGES
No material changes in the financial position of Purchaser or
material changes in the information previously disclosed to Seller shall have
occurred.
8. USE OF NAME
Purchaser and its affiliated entities shall have the right to use the
names "Value Tel", "Teletrek", "Discount Network Services" and all other
names currently being used by
14
Seller in the conduct of its business with respect to the Qualified Customer
Accounts for the period referenced in the Service Agreement.
9. COVENANT NOT TO COMPETE
As a material inducement for Purchaser to enter into and close this
Agreement, Seller agrees that, for a period of five (5) years from the
Closing Date, neither Seller nor any affiliate of Seller will directly or
indirectly offer any long distance services to the Qualified Customer
Accounts. Further, Seller agrees that neither Seller nor any affiliate of
Seller will use or disclose any information regarding the telecommunication
services of the Qualified Customer Accounts, for a period of five (5) years
following the Closing Date, without the prior written consent of Purchaser,
which consent may be withheld in the sole and absolute discretion of
Purchaser. The covenants contained herein shall apply even if the customer
is not then using the services of Purchaser. Seller acknowledges and agrees
that the extent of damages to Purchaser in the event of a breach of the
covenants contained in this Section would be impossible to ascertain and
there is and will be available to Purchaser no adequate remedy at law to
compensate it in the event of such a breach. Consequently, Seller agrees
that, in the event Seller breaches any such covenants, Purchaser shall be
entitled to enforce any and all of the covenants by injunctive or other
equitable relief ordered by any court of competent jurisdiction.
Notwithstanding any other provision contained in this paragraph to contrary,
Seller may offer, on an unsolicited basis, long distance services to any
Qualified Customer Account which has not used Purchaser's long distance
service for a continuous period of at least one (1) year.
10. INDEMNIFICATION MANNER OF CLAIMS
10.1 INDEMNIFICATION
(a) From and after the Closing Date, Seller will indemnify
Purchaser against, and hold Purchaser harmless from, any and all liability,
damage, deficiency, loss, cost or expense (including reasonable attorney's
fees) that is based upon or that arises out of (i) any misrepresentation or
breach of any representation, warranty or agreement made by Seller herein
(ii) any obligation, debt or liability of Seller to the extent that the same
is not expressly assumed herein by Purchaser, or (iii) the use and ownership
of the Assets on or prior to the Closing Date (other than those liabilities
specifically assumed by Purchaser hereunder).
(b) Purchaser will indemnify Seller against, and hold it harmless
from, any and all liability, damage, deficiency, loss, cost or expense
(including reasonable attorney's fees) that is based on or that arises out of
(i) any misrepresentation or breach of any representation, warranty or
agreement made by Purchaser herein, (ii) the failure by Purchaser to
discharge any and all liabilities, obligations and commitments of Seller to
the extent that the same are assumed by Purchaser hereunder, or (iii) the use
and ownership of the Assets from and after the Closing Date.
15
10.2 MANNER OF CLAIMS
Any notice of a claim by reason of any of the representations and
warranties contained in this Agreement shall state specifically the
representation or warranty with respect to which the claim is asserted, and
the amount of liability asserted against the other party by reason of the
claim.
11. MISCELLANEOUS
11.1 CONSENTS OF THIRD PARTIES
This Agreement shall not constitute an agreement to assign any
interest in any instrument, contract, lease, permit or other agreement or
arrangement of Seller, or any claim, right or benefit arising thereunder or
resulting therefrom, if any assignment without the consent of a third party
would constitute a breach or violation thereof or adversely affect the rights
of the Purchaser or Seller thereunder. If a consent of a third party which
is required in order to assign any instrument, contract, lease, permit or
other agreement or arrangement or any claim, right or benefit arising
thereunder or resulting therefrom, which consent Seller shall use its best
efforts to obtain prior to the Closing, is not obtained prior to the Closing,
or if an attempted assignment would be ineffective or would adversely affect
the ability of Seller to convey its interest to the Purchaser, Seller will
cooperate with Purchaser in any lawful and economically feasible arrangement
to provide that Purchaser shall receive Seller's interest in the benefits
under any such instrument, contract, lease, permit or other agreement or
arrangement; and any transfer or assignment to Purchaser by Seller of any
interest under any such instrument, contract, lease, permit or other
agreement or arrangement that requires the consent of a third party shall be
made subject to such consent or approval being obtained.
11.2 EXPENSES
Subject to the terms of Section 10 hereof, each of the parties
hereto shall bear its own expenses, costs and fees (including attorney's
fees) in connection with the transactions contemplated hereby, including the
preparation and execution of this Agreement and compliance herewith, whether
or not the transactions contemplated hereby shall be consummated.
11.3 SEVERABILITY
If any term or provision of this Agreement shall be held or deemed
to be, or shall in fact be, inoperative or unenforceable as applied in any
particular case because it conflicts with any other provision or provisions
hereof or any constitution or statute or rule of public policy, or for any
other reason, such circumstances shall not have the effect of rendering the
term or provision in question inoperative or unenforceable in any other case
or circumstance, or of rendering any other provision or provisions herein
contained invalid, inoperative, or unenforceable to any extent whatever, but
such term or provision shall be
16
deemed modified or deleted as or to the extent required by applicable law.
The invalidity of any one or more phrases, sentences, clauses, sections, or
subsections of this Agreement shall not affect the remaining portions of this
Agreement.
11.4 NOTICES
All notices, consents, requests, instructions, approvals and other
communications provided for herein in regard hereto shall be validly given,
made or served, if in writing and delivered personally or sent by registered
or certified mail (return receipt requested), postage prepaid, (i) if to
Purchaser at 000 Xxxxxxx Xxxxxx, Xxxxx Xxxxx, Xxxxxxxxx, 00000, Attn: Xxxx
Xxxx, President; and (ii) if to Seller at 0000 Xxxxxx Xxxxx Xxxxx, Xxxxx 000,
Xxxxxxxxxx, Xxxxxxxx, 00000, Attn: Xxx Xxxxx, President, in each case at such
other address as may be specified in writing to the other parties.
11.5 AMENDMENT
This Agreement may not be amended except by an instrument in
writing, duly executed and delivered on behalf of each of the parties hereto.
11.6 WAIVER
Any party may waive compliance by another with any of the
provisions of this Agreement. No waiver of any provisions shall be construed
as a waiver of any other provision. Any waiver must be in writing.
11.7 COUNTERPARTS
This Agreement may executed in multiple counterparts, each of which
shall be deemed an original agreement, and all of which taken together shall
constitute one agreement, notwithstanding that all of the parties are not
signatories to the original or the same counterpart.
11.8 ASSIGNMENT
Any assignment of this Agreement or the rights or obligations
hereunder by any party without the prior written consent of the nonassigning
parties shall be void. Notwithstanding the foregoing, either party may assign
all or any party of its rights and/or obligations to one or more affiliates,
subsidiaries, parent companies or shareholders of said party. No such
assignment shall relieve the assigning party of any of its obligations or
duties under this Agreement.
11.9 COSTS
17
In the event any action is instituted to enforce or interpret the
terms of this Agreement or arises out of this Agreement, the party prevailing
in such action shall be entitled to recover its reasonable attorney's fees
and costs as determined by the court.
11.10 ENTIRE AGREEMENT; APPLICABLE LAW, ETC.
This Agreement constitutes the entire agreement and supersedes all
prior agreements and understandings, both written and oral, among the parties
with respect to the subject matter hereof. This Agreement shall be governed
in all respects, including validity, interpretation and effect, by the laws
of the State of Louisiana applicable to contracts made and to be performed in
Louisiana.
11.11 INDUSTRY TERMS AND PHRASES
All terms and phrases unique to the telecommunications industry and
used within this Agreement shall be defined in accordance with the everyday
meaning assigned to such terms and phrases within the industry.
11.12 ADDITIONAL TERMS, COVENANTS, ETC.
(a) REGISTRATION OF RESTRICTED STOCK. Purchaser hereby warrants
that, after sixty (60) days from the Closing and upon Seller's request, it
will file a Form S-3 Registration Statement with the Securities Exchange
Commission to apply for registration of the Restricted Stock issued hereby in
order to allow Seller the ability to sell or transfer its Restricted Stock.
Purchaser further warrants that it will, to the extent permitted by any
future underwriter(s) of Purchaser's common stock, to "piggyback" or
register, as part of a secondary offering of Seller's common stock, up to
twenty percent (20%) of all shares of Restricted Stock received by Seller at
the Closing. Any covenants of Purchaser contained in this paragraph (a)
shall be subject to and limited by the terms and conditions of the Lock-Up
Agreement referred to in paragraph (b) below.
(b) LOCK-UP. At the Closing, the parties shall enter into a
mutually acceptable lock-up agreement (the "LOCK-UP AGREEMENT"), a copy of
which is attached hereto as EXHIBIT 11.12(b), containing certain restrictive
covenants regarding share ownership and transfer of shares.
(c) CONSENT AND APPROVAL OF WILTEL. The transactions contemplated
by this Agreement shall be strictly contingent upon the consent and approval,
in writing, of Wiltel, the assumption by Purchaser of Seller's outstanding
contractual obligation to Wiltel under its Wilmax contract (the "VALUE
TEL/WILTEL CONTRACT"), the assumption by Purchaser of Seller's indebtedness to
Wiltel under the Value Tel/Wiltel Contract, the indemnification by Purchaser
of Seller of any and all amounts owed to Wiltel by Seller under the terms of
the Value Tel/Wiltel Contract and the release by Wiltel of Seller from any
further obligations under the Value Tel/Wiltel Contract. Purchaser further
agrees to pay Seller any and all sums which Purchaser recoups, if any, from
Wiltel as a result of any and all
18
penalties and minimum usage commitment payments which were erroneously billed
to Seller by Wiltel for usage which occurs prior to the Closing.
(d) DIRECTORSHIP. Purchaser hereby agrees to appoint Xxx Xxxxx to
Purchaser's Board of Directors commencing with the Closing and terminating
upon the expiration of two (2) years from the Closing.
(e) TAX CONSEQUENCES TO SELLER. The transactions contemplated by
this Agreement shall be strictly contingent upon the opinion of Seller's
accounting and tax advisors that the transaction qualifies as a "C"
Reorganization for federal and state income tax purposes. In the event the
transaction does not qualify as a "C" Reorganization due to any action or
omission of Seller, Purchaser reserves the right to claim any and all tax
and/or accounting benefits which it could not otherwise claim, including but
not limited to any benefits relating to tax basis and asset carrying values.
12. TERMINATION.
12.1 MUTUAL CONSENT. This Agreement may be terminated at any time prior
to the Closing by mutual consent of Seller and Purchaser, expressed by action
of their respective Boards of Directors.
12.2 FINAL DATE. Anything contained in this Agreement to the contrary
notwithstanding, unless extended by mutual consent of Seller and Purchaser,
expressed by action of their respective Boards of Directors, this Agreement
shall terminate if the Closing shall not have occurred by the close of
business on NOVEMBER 15, 1995.
12.3 REMEDIES ON TERMINATION. In the event any party hereto, without
the right to do so under this Agreement, shall fail or refuse to consummate
the transactions contemplated by this Agreement, or if any default under, or
breach of, any representation, warranty, covenant or condition of this
Agreement on the part of any party shall have occurred that results in the
failure to consummate the transactions contemplated hereby, then, in addition
to any other remedies provided in this agreement or by applicable law, the
nondefaulting party shall be entitled to obtain from the defaulting party
costs and expenses, including reasonable attorney's fees, incurred by it in
enforcing its rights hereunder, including but not limited to the right to
seek specific performance of this Agreement.
12.4 TERMINATION UPON VARIATION OF STOCK PRICE. In the event the
average of the prevailing "bid" and "asked" price per share of Purchaser's
common stock as of the close of the stock market on the day before the
Closing is above $11.50 or below $8.50, either party may terminate this
Agreement with no liability to the other party.
13. COVENANTS REGARDING THE PROVISION OF AUDITED FINANCIAL STATEMENTS
19
13.1 OBLIGATION TO PROVIDE. Seller agrees to provide Purchaser with
audited financial statements which comply with Regulation S-X of the
Securities Act of 1933, as amended. The financial statements must be
provided no later than fifty (50) days from the Closing and may be filed with
the Securities Exchange Commission.
13.2 RELIEF. If Seller fails and/or refuses to provide Purchaser with
audited financial statements in compliance with paragraph 13.1 above,
Purchaser shall be entitled to obtain, in addition to any other remedies
provided in this Agreement or by applicable law, from Seller all costs and
expenses, including reasonable attorney's fees, incurred by it in enforcing
its rights hereunder, as well as a penalty in the amount of $190,000.
20
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
date first written above.
Network Long Distance, Inc. Value Tel, Inc.:
By: /s/ XXXX XXXX By: /s/ XXX XXXXX
---------------------------------- ----------------------------------
Name: Xxxx Xxxx Name: Xxx Xxxxx
Title: President Title: President
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SCHEDULE 1.1: THE "ASSETS"
The "Qualified Customer Accounts"
The "Accounts Receivable"
The "Customer Contracts"
All "Assets" listed in paragraph 1.1 herein
LIST OF ACCOUNTS
SECTION #3
(INTENTIONALLY OMITTED DUE TO CAPACITY)
SCHEDULE 2.3(b)(viii): "ACCOUNTS RECEIVABLE"
0-30 31-60 61-90 OVER 90 TOTAL
ADET_00 $63,520 $86,038 $33,862 $47,412 $230,832
ADET_PB2 $364,568 $233,042 $46,617 $123,577 $767,893
-------- -------- ------- -------- --------
$428,178 $319,080 $80,478 $170,990 $998.72
42.87% 31.95% 8.06% 17.12%
est pay $17,149 $12,779 $3,223 $6,848 $40,000
est $411,029 $306,300 $77,255 $164,141 $958.724
usage $863,350 $411,029 $306,300 $241,396 $1,822,076
fees $42,000
-------- -------- -------- -------- ----------
est at 10/31 $905,350 $411,029 $306,300 $241,396 $1,864,076
SCHEDULE 2.4: ALLOCATION OF PURCHASE PRICE
(Intentionally left blank)
SCHEDULE 2.5: LIABILITIES AND OBLIGATIONS ASSUMED BY PURCHASER
Network Long Distance, Inc. $ 610,000
American Teltronics 50,000
WilTel 675,000
Nowalsky & Bronston 24,000
----------
$1,359,000
SCHEDULE 3.5: LIENS AND ENCUMBRANCES
Security Agreement and UCC-1 Financing Statement in favor of WilTel (SEE
Paragraph 11.12(c) of the Agreement)
SCHEDULE 3.6: MATERIAL CONTRACTS
The "Value Tel/WilTel Contract"
The "Agent Contracts"
SCHEDULE 3.8(a): ACTIONS, SUITS, PROCEEDINGS, ETC.
Seller believes that various state and/or federal tax liabilities may exist
???? assets sold herein. Seller shall discharge, pay and/or settle, in full,
all such ????.
SCHEDULE 3.8(c): LICENSES, PERMITS, ETC.
(None)